In Sun-Times Media Group, Inc. v. Royal & SunAlliance Ins. Co. of Canada, the Delaware Superior Court considered insurers’ usual arguments as to why they should be able to refuse to advance defense costs, as they promised to do in their policies. The Sun-Times decision considered, and rejected, arguments that the insurers did not have to advance defense costs because of personal conduct exclusions, consent to settle and cooperation clauses, and the priority-of-payments clauses.

This commentary, written by Scott N. Godes, counsel at Dickstein Shapiro LLP, who represents policyholders in insurance coverage disputes, discusses the implications of the Sun-Times decision for policyholders facing coverage disputes under directors and officers insurance policies. (The views and opinions expressed in this article are solely those of the author and not necessarily those of his current or former law firms and/or clients.). Readers may access the full text of the Sun-Times Media Group decision here.

Godes writes that, in attempting to refute their duty to defend, “[t]he insurers relied on several arguments, . . . assert[ing] that they had no obligation to advance defense costs because of . . . the “fraud” and “personal profit” exclusions[;] . . . “the consent-to-settle or cooperation clauses; . . . [and] the priority-of-payments clause.” Godes explains the court’s rationale in rejecting all of those arguments.

Throughout the article, Godes notes the importance of the court’s holdings rejecting the insurance companies’ arguments. For example, Godes explains that the court’s decision that “the policy required the insurers to advance defense costs prior to final disposition of the claim . . . is of critical importance, because it required the insurers to advance defense costs contemporaneously, notwithstanding the exclusions” for fraud and personal profit.

Godes concludes that the “Sun-Times decision correctly rejected the insurers’ numerous roadblocks to advancing defense costs, as they had promised to do in their policies.” He notes that because insurance companies “raise the same or similar arguments in directors and officers coverage disputes across the country,” the Sun-Times decision “should be considered persuasive authority against the insurers’ wrongful attempts to deny coverage.”